109 HR 4881 IH: National Defense Critical Infrastructure Protection Act of 2006 U.S. House of Representatives 2006-03-07 text/xml EN Pursuant to Title 17 Section 105 of the United States Code, this file is not subject to copyright protection and is in the public domain.

I 109th CONGRESS 2d Session H. R. 4881 IN THE HOUSE OF REPRESENTATIVES March 7, 2006 Mr. Hunter (for himself, Mr. Saxton, Mr. Skelton, Mr. Davis of Kentucky, Mrs. Jo Ann Davis of Virginia, Mr. Jones of North Carolina, Mr. LoBiondo, Mr. Miller of Florida, Mr. Smith of New Jersey, Mr. Poe, Mr. Bachus, Mr. Hefley, Mr. Ney, Mr. Turner, and Mr. Duncan) introduced the following bill; which was referred to the Committee on Financial Services, and in addition to the Committees on Armed Services, Energy and Commerce, International Relations, and Homeland Security, for a period to be subsequently determined by the Speaker, in each case for consideration of such provisions as fall within the jurisdiction of the committee concerned A BILL To promote the national defense by establishing requirements for the ownership, management, and operation of critical infrastructure in the United States, and for other purposes.

1.

Short title

This Act may be cited as the National Defense Critical Infrastructure Protection Act of 2006.

2.

Citizenship and other requirements for ownership, management, and operation of United States critical infrastructure

(a)

Limitation on corporate ownership and management and operation

A corporation may not own, or be authorized (by contract or otherwise) to manage or operate, any system or asset that is included on the national defense critical infrastructure list unless the corporation meets the critical infrastructure national security management requirements. (b)

Critical infrastructure national security management requirements

A corporation meets the critical infrastructure national security management requirements for purposes of subsection (a) only if each of the following applies to the corporation: (1)The corporation is organized under the laws of the United States. (2)The corporation has a board of directors the majority of whom are citizens of the United States. (3)The corporation has a chief executive officer and chairman of the board of directors who are citizens of the United States. (4)A majority of the voting shares of the corporation, and a majority of nonvoting shares of the corporation, are owned by citizens of the United States. (5)More than 50 percent of the members of the board of directors of the corporation have been approved by the Secretary of Defense, in consultation with the Secretary of Homeland Security, for membership on the board. (6)Not less than 20 percent of the members of the board of directors are independent directors. (7)All of the independent directors have been approved by the Secretary of Defense, in consultation with the Secretary of Homeland Security, for membership on the board. (8)The board of directors has a government security committee, all of whose members are approved by the Secretary of Defense, in consultation with the Secretary of Homeland Security, for membership on the committee. (9)The board of directors has a compensation committee that— (A)is comprised of citizens of the United States; and (B)includes the independent directors approved under paragraph (7). (10)The corporation has agreed to allow, and has instituted procedures to authorize, the Secretary of Defense, in consultation with the Secretary of Homeland Security, to annually inspect the procedures of the corporation for handling classified information and, based on such an annual inspection, the procedures of the corporation for handling classified information have been approved by the Secretary of Defense. In the case of a corporation that as of the effective date of subsection (a) owns, or is authorized by contract (or otherwise) to manage or operate, a system or asset that is included on the national defense critical infrastructure list, the provisions of paragraph (4) of this subsection take effect with respect to that corporation as of the date that is five years after the date of the enactment of this Act. (c)

Notification requirements

Any corporation that has met the requirements of subsection (b) and that owns, or manages or operates, a system or asset on the national defense critical infrastructure list shall promptly submit notice to the Secretary in the event any of the following occurs: (1)Acquisition of ownership or beneficial ownership, direct or indirect, of five percent or more of the corporation’s voting securities by a foreign person. (2)Acquisition of ownership or beneficial ownership, direct or indirect, of 25 percent or more of any class of the corporation’s nonvoting securities by a foreign person. (3)Authority or ability of a foreign person to have power, direct or indirect, to control the election, appointment, or tenure of directors, officers, or executive personnel of the corporation and the power to control other decisions or activities of the corporation. (4)Total revenues or net income in excess of five percent from a single foreign person or in excess of 30 percent from foreign persons in the aggregate in any fiscal year of the corporation. (5)Ten percent or more of any class of the corporation’s voting securities held in nominee shares, street names, or in some other method that does not disclose the beneficial owner of equitable title. (6)Interlocking directors with foreign persons and any officer or management official of the applicant company who is also employed by a foreign person. (7)Any other factor that indicates or demonstrates a capability on the part of foreign persons to control or influence the operations or management of the corporation. (8)Acquisition by the corporation of ownership of 10 percent or more of any foreign interest. (d)

National defense critical infrastructure list

(1)

In general

For purposes of this section, the Secretary of Defense, in consultation with the Secretary of Homeland Security, shall prepare and maintain a list, to be known as the national defense critical infrastructure list, of critical infrastructure in the United States. The list shall include both military installations and non-military installations. (2)

Submission to congressional committees

Whenever the national defense critical infrastructure list is revised, the Secretary of Defense shall, not later than 15 days after the date of the revision, submit notice of the revision in writing to the following: (A)The Committee on Armed Services of the Senate. (B)The Committee on Armed Services of the House of Representatives. (3)

Critical infrastructure defined

In this section, the term critical infrastructure means any system or asset, whether physical or virtual, that is so vital to the United States that the incapacity or destruction of such system or asset would have a debilitating effect on national security, on national economic security, on national public health or safety, or on any combination of those matters. (e)

Citizen of the United States defined

In this section: (1)

Citizen of the united states

The term citizen of the United States includes— (A)a person that is a citizen of the United States under section 2 of the Shipping Act, 1916 (46 U.S.C. App. 802); and (B)a United States citizen trust. (2)

United States citizen trust

(A)Subject to subparagraph (C), the term United States citizen trust means a trust that is qualified under this paragraph. (B)A trust is qualified under this paragraph with respect to critical infrastructure only if— (i)each of the trustees is a citizen of the United States; and (ii)the trust submits to the Secretary of Defense an affidavit of each trustee stating that the trustee is not aware of any reason involving a beneficiary of the trust that is not a citizen of the United States, or involving any other person that is not a citizen of the United States, as a result of which the beneficiary or other person would hold more than 25 percent of the aggregate power to influence or limit the exercise of the authority of the trustee with respect to matters involving any ownership or operation of the critical infrastructure that may adversely affect the interests of the United States. (C)If any person that is not a citizen of the United States has authority to direct or participate in directing a trustee for a trust in matters involving any ownership or operation of the critical infrastructure that may adversely affect the interests of the United States or in removing a trustee for a trust without cause, either directly or indirectly through the control of another person, the trust is not qualified under this paragraph unless the trust instrument provides that persons who are not citizens of the United States may not hold more than 25 percent of the aggregate authority to so direct or remove a trustee. (D)This paragraph shall not be considered to prohibit a person who is not a citizen of the United States from holding more than 25 percent of the beneficial interest in a trust. (f)

Effective dates

(1)

In general

Subsection (a) shall take effect on the date on which the national defense critical infrastructure list is submitted to Congress pursuant to paragraph (2) and shall apply to any corporation covered by that subsection as of that date or thereafter. (2)

National defense critical infrastructure list

The national defense critical infrastructure list required by subsection (c) shall be established, and the initial list under that subsection shall be submitted in writing to the Congress, not later than three months after the date of the enactment of this Act. (g)

Special rule for certain port terminals

(1)

Special rule

The port terminals specified in paragraph (2) are deemed to be on the national defense critical infrastructure list, and the provisions of subsection (a) apply with respect to those terminals effective as of February 28, 2006. (2)

Specified port terminals

The port terminals specified in this paragraph are the following: (A)The terminals that as of February 28, 2006, were operated by the United Kingdom company, Peninsular and Oriental Steam Navigation Company (P & O), at the following United States ports: (i)Baltimore, Maryland. (ii)Philadelphia, Pennsylvania. (iii)Miami, Florida. (iv)New Orleans, Louisiana. (v)Houston, Texas. (vi)Newark and Elizabeth, New Jersey. (B)Any terminal at a port in the United States other than a port listed in subparagraph (A) that as of February 28, 2006, was operated in part, or with the contribution of, the company named in subparagraph (A).

3.

Enhanced authority to review certain foreign mergers, acquisitions, and takeovers

(a)

Confidentiality of information

Subsection (c) of section 721 of the Defense Production Act of 1950 (50 U.S.C. App. 2170(c)) is amended— (1)by inserting during the process of investigation after prevent disclosure; and (2)by inserting of any information considered during the process of investigation before the period at the end. (b)

Findings of the President

Subsection (e) of such section (50 U.S.C. App. 2170(e)) is amended— (1)in the matter preceding paragraph (1)— (A)by striking may and inserting shall; (B)by striking subsection (c) and inserting subsection (d); and (C)by striking only; and (2)by striking paragraph (1) and inserting the following: (1)there is either— (A)credible evidence that leads the President to believe that the foreign interest exercising control might take action that threatens to impair the national security; or (B)a reasonable expectation that the foreign interest exercising control would use such control— (i)to adversely affect the ability of domestic industries to meet existing production requirements for defense or homeland security; (ii)to acquire advanced technology illicitly; or (iii)to increase its ability to affect United States critical infrastructure; and. (c)

Factors to be considered

Subsection (f) of such section (50 U.S.C. App. 2170(f)) is amended— (1)in the matter preceding paragraph (1)— (A)by striking may and inserting shall; and (B)by striking factors— and inserting factors the following:; (2)by capitalizing the first letter of the first word of paragraphs (1), (2), (3), (4), and (5); (3)at the end of paragraphs (1), (2), and (3), by striking the comma and inserting a period; (4)at the end of paragraph (4), by striking ; and and inserting a period; (5)by redesignating paragraph (5) as paragraph (8); and (6)by inserting after paragraph (4) the following new paragraphs: (5)Domestic production needed to meet the needs of homeland security. (6)The potential effects of the proposed or pending transaction on control of critical infrastructure, such as energy, telecommunications, transportation, or information. (7)The potential effects of the proposed or pending transaction on secure United States access to strategic natural resources, including energy supplies and critical minerals.. (d)

Notification to government

(1)

Required notice of proposed or pending transactions

Such section is further amended— (A)by redesignating subsections (g), (h), (i), (j), and (k) as subsections (h), (i), (j), (k), and (l), respectively; and (B)by inserting after subsection (f) the following new subsection: (g)

Notification to government

(1)

Required notice

The President shall provide for the regulations issued pursuant to this section to require that, in any case in which there is a proposed or pending merger, acquisition, or takeover that is or may be subject to an investigation under subsection (a), the President or the President’s designee shall be provided written notification of the proposed or pending merger, acquisition, or takeover, as referred to in the second sentence of subsection (a), and that such written notification shall be provided in sufficient time for the review process under this section to be completed before the proposed or pending merger, acquisition, or takeover is finalized. (2)

Publication in Federal Register

Any notification pursuant to paragraph (1) shall be published in the Federal Register within five days of such notification.. (2)

Interim rules

The President or the President’s designee may prescribe interim rules necessary to carry out the responsibilities under subsection (g) of section 721 of the Defense Production Act of 1950 as added by paragraph (1)(B). Any otherwise applicable notice-and-comment requirement of section 553 of title 5, United States Code, shall not apply to such interim rules. Interim rules prescribed under the authority of this subsection that are not earlier superceded by final rules shall expire as specified in such interim rules, but not later than the end of the one-year period beginning on the the date of the enactment of this Act. (e)

Annual report

Subsection (l) of such section, as redesignated by subsection (d)(1), is amended— (1)in the subsection heading, by striking Quadrennial report.— and inserting Annual report.—; and (2)in paragraph (1), by striking not later than 1 year and all that follows through every 4 years thereafter and inserting not later than November 1 each year. (f)

Technical Amendments

Such section is further amended— (1)in subsections (a) and (d), by striking the date of enactment of this section and inserting August 23, 1988; (2)in subsection (d), by striking subsection (d) and inserting subsection (e); and (3)in the last sentence of subsection (h), as redesignated by subsection (d)(1), by striking of this Act. (g)

Effective dates

(1)

Applicability to new investigations

The amendments made by this section shall apply with respect to any investigation under section 721 of the Defense Production Act of 1950 (50 U.S.C. App. 2170) that is commenced after the date of the enactment of this Act. (2)

Time limit for required new regulations

Regulations required by subsection (g) of such section, as added by the amendment made by subsection (d)(1)(B), shall be prescribed not later than the end of the one-year period beginning on the date of the enactment of this Act.

4.

Mandatory inspection of cargo

(a)

Mandatory inspections

No cargo transported by a commercial motor vehicle may enter the United States from Canada or Mexico, and no cargo transported by vessel may be unloaded in the United States, unless an appropriate officer or employee of the Directorate of Border and Transportation Security or other appropriate officer or employee of the United States has inspected the cargo to ensure that it complies with the laws of the United States. (b)

Definitions

In this section: (1)

Cargo

The term cargo means property, or mail, or both. (2)

Commercial motor vehicle

The term commercial motor vehicle means a commercial motor vehicle as defined in section 31101(1) of title 49, United States Code, that is used principally to transport cargo. (3)

United States; vessel

The terms United States and vessel have the meanings given those terms in section 401 of the Tariff Act of 1930 (19 U.S.C. 1401). (c)

Effective date

This section shall take effect 6 months after the date of the enactment of this Act.